Capitol Stand-off: Republicans Caving?

My prediction: House Republicans will eventually cave in and accept the two-month extension of the payroll tax cut passed last week by the Senate.

I base this on conversations with House Republicans who know they are losing the public relations battle and losing it badly. They know they are taking the blame for a stand-off that threatens to raise taxes on 160 million Americans. And they cannot let that happen.

As one top House Republican aide just told me: "I do not expect taxes to go up on January 1st."

At this point, there is really only one way for taxes not to go up on January 1st: House Republicans need to fold. Democrats won't give in because they are completely confident that House Republicans will take the blame for the impasse. And Republicans don't disagree.

Republicans are now searching for a face-saving way to give up. The most likely scenario would be for Democrats to agree to negotiations on a full-year extension to begin as soon as next week - but only after the House passes the two-month extension.

House Republicans find themselves in a political disastrous position. They are almost entirely alone in this stand-off. Not only did the Senate pass the two-month extension with overwhelming Republican support (only seven Senate Republicans voted no), but several prominent Republicans, including Scott Brown and John McCain, have called on the House to pass the bill.

"Republicans would do best to cut their losses and find a way to extend the payroll holiday quickly," the Wall Street Journal editorial advised. "Then go home and return in January with a united House-Senate strategy that forces Democrats to make specific policy choices that highlight the differences between the parties on spending, taxes and regulation."

And that, I predict, is exactly what they will do.

UPDATE: Not so fast. Another top House Republican aide cautions that a resolution to the payroll tax standoff will likely take longer than 24 hours - and potentially may not happen until next week.

The issue: rank and file Republicans think the Senate bill is "atrociously bad." They don't want their leadership to give up so quickly after voting overwhelmingly to reject it yesterday.

"Our members expect us to spend some time explaining and defending what we did - even if we are playing from a disadvantageous position," said the House Republican aide.

This aide agrees that the payroll tax cut will almost certainly be extended before January 1 and that Republicans will likely be forced to accept the two-month extension, but he warns that the standoff may go on for several more days.